In the new financial year, taxpayers are gearing up to file their income tax returns (ITRs) for FY2024-25 (Assessment Year 2025-26). At the same time, these taxpayers do their math to check how much they can save in taxes by opting for a suitable tax regime based on their investments and income brackets.

We all want to save a large part of our income, and tax planning is one way to reduce tax liability and save more. Under the Income Tax Act, 1961, certain investments, savings, and expenses are tax-exempt. We often make investments in certain financial products that enjoy tax exemptions under both old and new tax regimes.

Old tax regime, however, still offers taxpayers a range of options to save taxes through various eligible deductions and exemptions post the 2025 Union Budget. On the other hand, the new tax regime has fewer deductions available for taxpayers compared to the old regime. In this write-up, we will discuss various deductions available under the new tax regime for tax saving.

Tax exemptions and deductions in the new tax regime

The new tax regime offers limited tax deductions. Finance Minister Nirmala Sitharaman in the Union Budget 2025 announced some new deductions for the new tax regime. But still, you are better off under the old tax regime if you have invested in multiple investment tools and are availing deductions and exemption benefits. But if you have not made many tax-saving investments, then the new regime can be beneficial for you, as the tax slab rates in it are lower than the old regime.

Here are 6 benefits available under the new tax regime.

1. Standard Deduction

The standard deduction under the new tax regime has been increased to Rs 75,000 from Rs 50,000, effective FY 2025-26. In the old regime, the standard deduction is still at Rs 50,000.

1. Exemption on employer’s contribution to NPS – Section 80CCD(2)

This exemption is available only to salaried persons; freelancers or self-employed people cannot avail it. If your employer has contributed to your NPS account, you can avail additional exemptions over and above this:

For government employees: Up to 14% of Basic + DA

For private sector employees: Up to 10% earlier

1. Exemption on contribution to Agniveer Corpus Fund – Section 80CCH(2)

Under the Agneepath scheme, contributions made by both Agniveer and the government are tax deductible. If a beneficiary or his nominee receives the amount under this scheme, then tax exemption is also given on that. This exemption is valid in both tax regimes.

1. Exemption on family pension – Section 57(iia)

If the family of an employee receives pension after his death, then it is exempted.

In the new tax regime:

1/3rd or up to Rs 25,000 (whichever is less) is exempt.

5. Transport & Conveyance Allowance

Transport allowance: Disabled employees get an exemption of up to Rs 3,200 per month if they travel from home to office.

Conveyance Allowance: Expenses incurred during office work are deductible as per the actual expenses incurred.

6. Some exemptions under section 10 in the new tax regime

Earlier, there were no exemptions under section 10 in the new tax regime, but now some have been included:

Voluntary Retirement (VRS): Up to Rs 5 lakh is deductible.

Gratuity: Fully exempted for government employees; for private employees, dependent on the situation.

Leave Encashment: Leave pay at the time of retirement or resignation is tax-free up to ₹25 lakh, above which the amount will be taxable.

If you have been using fewer of the traditional tax-saving options, then the new tax regime can be beneficial for you. Especially for those who draw a modest salary, the new regime offers a simple and transparent tax system with a standard deduction and some basic exemptions.